John Allison

When the Federal Reserve steps in and uses monetary policy to stop the downside correction process, all it achieves is to defer problems to the future and make them worse. Its action delays and distorts the natural market correction process, thereby reducing the long-term productivity of the economic system by encouraging a misuse of capital and labor. One of the best ways to view free markets is as a great number of experiments that are being conducted simultaneously. Most of the experiments are failures. However, every failure contributes to the learning process. Thomas Edison noted that the 1,000 apparently failed experiments that led to the lightbulb were, in fact, absolutely necessary. For every Google or Microsoft, there are 1,000 failures, all of which are in a certain sense necessary.

from The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy’s Only Hope by John A. Allison


The true cost of regulations in that in the effort to avoid the pain of small failures we also stop the construction of firewalls that would avoid large failures.  Secondly, we miss the value of failures in ultimately achieving success and innovation and thus inadvertently miss out on opportunities and new discoveries. This combination of outcomes increases the downside and restrains the upside.